Caijing's May 1 issue features Hu Xiaolian, the central bank's foreign exchange chief, on the cover. The article is an interview with Hu. The below is Caijing's own English summary of the story:

The central bank's foreign exchange cheif Hu Xiaolian tells Caijing in an interview that China is ready to take "faster steps" towards capital account convertability . Hu says that new central bank policies announced April 13 allowing domestic institutional investors to invest overseas weren't intended to deflect international pressure on China to revalue the yuan. Instead, the new policies mark a further step towards an open capital account.

Although Chinese banks and businesses are still ill prepared for exposure to foreign exchange risks, the central bank wil introduce reform gradually to mitigate risk, Hu says. The central bank will set individual quotas for domestic banks governing how much each can invest overseas, based on their ability to control risk.

NOTE: Caijing publishes English summaries of their articles on their website (link below), but the latest English texts have not been uploaded yet. The summary above is from Caijing's print edition.

This is an interesting development that is definitely worth following. I wonder how Chinese banks will handle foreign exchange risk. Obviously this question has far-reaching implications about China's future in the world economy.

The more I know, the more I worry that an increase in the value of the Yuan will no more harm than good to the United States. I would love to see an impartial (as though there is such a thing) economist really analyze this.

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